What You Need To Know About Long-Term vs. Short-Term Disability Insurance
As a business owner, it’s important to protect your most valuable assets—your employees. But when it comes to disability insurance, do you know the difference between short-term and long-term coverage? Understanding the length of time each policy covers, who needs it, and when each should be used can help ensure that your business is adequately protected in the event of an unexpected disability.
Read on to learn more about short-term and long-term disability insurance and how each type of coverage can benefit your business.
What Is Short-Term Disability Insurance?
Short-term disability (STD) insurance provides coverage for a relatively short period of time. It often lasts up to six months, but, in some cases, it can last up to a year. This coverage can provide a percentage of an employee’s wages if they become ill or injured and are unable to work due to the disability. The amount paid out typically ranges from 50 to 60% of the employee’s salary. In addition, short-term disability insurance may also cover associated medical costs such as doctor visits and medications.
Who Needs Short-Term Disability Insurance?
All businesses, regardless of size, should consider purchasing short-term disability insurance, especially if they employ people who are physically active or work in hazardous conditions. It’s also often recommended for employees who do not have savings that could cover their expenses should an illness or injury occur that prevents them from returning to work for an extended period of time.
How Long Is Short-Term Disability?
Short-term disability (STD) is designed to provide income protection during the recovery period from a short-term illness or injury, typically covering wages for a period lasting up to six months. STD is typically paid for by the employer and helps bridge the gap until an employee is able to return to work or until they can receive benefits through other sources such as Social Security Disability Insurance.
What Is Long-Term Disability Insurance?
Long-term disability (LTD) insurance covers an individual’s income for a longer period than STD coverage does—typically up to two years or more. LTD policies enable individuals to maintain their standard of living if they have been disabled longer than the term of their STD policy and need ongoing financial protection. LTD policies may provide additional benefits such as rehabilitation services and job retraining help for those experiencing long-term disabilities.
Who Needs Long-Term Disability Insurance?
LTD insurance is typically recommended for those whose income would be significantly impacted by a long-term disability due to their age or occupation. Business owners should consider purchasing this type of policy so that they can continue receiving income even during times when they are not able to work due to illness or injury.
How Long Is Long-Term Disability?
Long-term disability (LTD) covers a longer period than STD, usually lasting anywhere from two years to retirement age. LTD provides a benefit if an employee is unable to work due to a permanent disability
Disability insurance covers the cost of medical care and lost wages due to an illness or injury. In the case of short-term disability, it can cover up to 100% of pre-disability income for a set period of time, usually up to six months. Long-term disability insurance provides a benefit if an employee is unable to work due to a permanent disability, usually for two years or until retirement age.
It’s important for business owners to understand the time short- and long-term disability lasts in order to ensure their employees are adequately covered. Knowing this information can help employers provide the best possible short- or long-term disability coverage for their employees in the event of an illness or injury, ensuring their financial well-being during difficult times.
Interested in Learning More About Long-Term Disability Options?
InSource Insurance Group can help you secure long term disability insurance options that keep your employees protected.
Long-Term vs. Short-Term Disability Insurance
While both types of disability insurance provide financial protection in cases of illness or injury, there are important differences between them, including:
- STD provides coverage for shorter periods while LTD covers longer periods.
- STD usually pays out 50 to 60%of employee salaries while LTD pays out around 60 to 70%.
- STD generally does not cover long-term medical costs while LTD does.
- Many employers offer both types, but some employers may only offer one or the other depending on their policies.
It’s important to understand which type fits your needs best before making any decisions about purchasing coverage for your business.
When Should You Buy Each Type Of Policy?
If you decide you need both types of disability insurance, it’s wise to purchase them at different times so that your business has optimal protection throughout its lifetime. It’s advisable to purchase short-term disability first since it offers more immediate protection in case something—such as an accident at work—happens and you need financial assistance while waiting on payments from your long-term policy.
Summarizing the Differences Between Long-Term vs. Short-Term Disability
Having both short-term and long-term disability insurance offers essential peace of mind for business owners in case of unexpected illnesses or injuries that prevent employees from working for an extended period of time. By understanding how each type works and who needs which one, you can make sure your business is adequately protected against future risks.
Contact InSource for Your Insurance Needs
Still unsure of what insurance plan works best for your business? Contact InSource today. We’ll work with you on developing a customized insurance plan that best meets your needs.
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